By Tridivesh Singh Maini

Haley’s Visit and Possible US Sanctions on Indian Imports of Iranian Oil

Some interesting developments have taken place in the
context of India-US relations in the past few days. US President Donald
Trump criticized India on June 27, 2018 for charging 100 percent
tariffs: “We have countries where, as an example, India, they charge up as much
as 100 per cent tariff. We want the tariffs removed.” This came at a time when
the US Ambassador to the UN, Nikki Haley Randhawa, was about to begin her India
visit. During her visit, Haley met with Indian Prime Minister Narendra Modi and
discussed a gamut of issues pertaining to the India-US bilateral relationship.

Trump’s remarks also came a week before an India-US 2+2 dialogue
was to be held between India’s External Affairs and Defence Ministers Sushma
Swaraj and Nirmala Sitharaman, and their US counterparts. This dialogue was
called off on June 27, and US Secretary of State Mike Pompeo explained to his
Indian counterpart, Sushma Swaraj, that the postponement
of the 2+2 dialogue was unrelated to the bilateral relationship.

On June 21, as a retaliatory
step against the Trump administration’s move to unilaterally raise
duties on Indian steel and aluminium, India
announced tariffs
against 30 US products worth $240 million with effect from August 4.
The India-US differences over tariffs have existed for some time and have not
benefited the bilateral relationship in any way. India has also been trying to find common
ground with other countries like China on the issue of tariffs.

An issue that has an even stronger bearing on India’s
economic and strategic interests is the categorical statements by US urging
India to reduce
oil imports from Iran to zero by November 4. Iran is currently India’s
third largest supplier of oil after Iraq and Saudi Arabia. The Trump
Administration has made it clear that no exemptions will be given to India, and
Indian businesses “will be subject to the same sanctions that everybody else’s
are if they engage in those sectors of the economy that are sanctionable.”

During Haley’s meeting with Modi, she put forth the Trump Administration’s view that India should
reduce its dependency upon Iranian oil, although she also stated that the US
had no problem with the Chabahar Project. In her address at a think-tank in New
Delhi, while highlighting the numerous convergences between US and India, she
spoke about the Iran issue: “I think as a friend [of the US] India should
decide whether [Iran] is a country they want to continue doing business with.”

It had been believed that India would be given an exemption
given the increasing convergence of India-US strategic interests. Defence
Secretary James
Mattis, for instance, had recommended keeping US allies like India
and Vietnam out of the Countering America’s Adversaries Through Sanctions Act
(CAATSA) when there was a growing call for the US to impose sanctions on India
after India announced its decision to acquire the S400 Air Defence Missile
System from Russia. Remarks by top US officials like John
Bolton about possible US sanctions on foreign companies working with
Iran should have been a strong enough hint that New Delhi was not likely to get
any exemption.

The reactions by Indian officials to the possible US
sanctions have been mixed. In a press conference in May, Foreign Minister Sushma
Swaraj stated that India only recognizes UN, not US sanctions. She
also said that India does not make its foreign policy under pressure from any
country.

India should work
more closely with other US allies who are also not happy with the Trump
Administration’s approach towards Iran.

That New
Delhi is prepared for repercussions is evident from the fact that
both countries had spoken about the Rupee-Rial trade during Iranian Foreign
Minister Mohammad Javad Zarif’s visit to India in May. Similarly, while
reacting to Haley’s statement that India needs to rethink its ties with Iran,
the spokesperson for India’s Ministry of External Affairs stated: “She has her
views, and ours views on Iran are very clear … We will take all necessary
steps, including engagement with relevant stakeholders to ensure our energy
security.”

However, there have also been indications that India is
looking to reduce its dependence upon Iran. For instance, Oil Minister Dharmendra
Pradhan stated that India was not dependent upon any one country for
its oil needs. Around the same time as the US announcement stating no exemptions
for Indian companies from US sanctions, Sheikh
Abdullah bin Zayed, the UAE Minister of Foreign Affairs, was in
India. During his visit, the Abu Dhabi National Oil Company, Saudi Aramco, and
a consortium of three Indian oil companies signed a strategic
partnership agreement to jointly develop the Ratnagiri refinery and
petrochemical complex. This development is significant, and some are viewing it
from the perspective of the reduction of India’s dependence on oil imports from
Iran.

Compared to China and Russia, India has been rather guarded
in its approach towards the US’ approach towards Iran. While the initial
reaction to Trump’s withdrawal from the Iran Deal was cautious, during the
Iranian Foreign Minister’s visit to New Delhi in May, Swaraj said: “All parties
to the agreement should engage constructively for peaceful resolution of the
issues.” Even during the Shanghai Cooperation Organization (SCO) Summit, while
Moscow and Beijing extended their unequivocal support to Iran, New Delhi was
cautious. Chinese President Xi
Jinping who met with Iranian President Rouhani on the sidelines of
the SCO Summit dubbed the Iran deal as “an important outcome of
multilateralism” and described it as being critical for maintaining peace and
stability in the Middle East. Prime Minister Modi, on the other hand, did speak
about regional connectivity and projects such as Chabahar Port, but made no
reference to the relevance of the Iran Deal and the need for the US to engage
with Iran.

On the issue of Iran, New Delhi will have to be firmer with
Washington DC, and put forward its economic and strategic interests clearly. So
far, a cautious approach has been adopted with the belief that the US may show
more flexibility, but given the recent statements by the US State Department as
well as Haley during her India visit, it certainly cannot be business as usual.
India needs to be pro-active and make its voice count. India should work more
closely with other US allies who are also not happy with the Trump Administration’s
approach towards Iran. Sitting on the fence on issues which have a bearing on
economic and strategic interests cannot be classified as seeking to balance
interests. A clearer policy on Iran will also send the unequivocal message that
New Delhi, while interested in maintaining strong ties with the US, will not
buckle under pressure and give up its strategic autonomy.